How online auto financing works

Online auto loans are really just a very fast and convenient form of direct financing. (By "direct financing" we mean any car loan that is obtained without the help of a dealer.)

Online or off, direct loans are highly recommended by consumer advocates. They allow you to negotiate the price of your car independent from it's financing, and put more bargaining power in your corner.

And we think the best and fastest way to a new car is with to borrow from an internet lender, because these institutions are able to save on overhead, and pass these savings on to you in the form of lower rates.

The advantages of online financing

Our recommended online lenders provide all the advantages of a good traditional lender: no application fee, no down payment, and the ability to negotiate as though you have "cash in hand".

But they also provide features only an online service can: easy online application, almost instantaneous approval, online access to your account 24 hours a day, and a money-saving automatic payment option.

But best of all, their interest rates are usually 1% to 2% lower than the national average. (Now we've got your attention!) And the drawbacks?

The disadvantages of online auto financing

To be honest, there aren't many. However, in these days of 0% financing, you may be able to score a better rate at the dealership. (But be careful: before you sign on for such a deal, read our brief analysis of zero-percent financing deals - which are available to a select few applicants with near-perfect credit only).

And if you belong to a good credit union, and your loan is small, they may offer rates similar to an online lender's, too. (Though it never hurts to shop around and compare.)

But be sure to keep in mind that special financing packages offered by dealerships often mean that restrictions apply. You may be penalized for early payments (neither of our recommended lenders does this), or have to accept a certain loan term.

Online lenders we like

So who are these great online lenders?

Well, Capital One is the biggest funder of online car loans in the country. They offer low-rate financing on new and used vehicles, and even on person-to-person transactions.

Their application process is a snap, and they'll approve you in fifteen minutes. They even have a cash-back satisfaction guarantee!Read more about Capital One, or apply with them now.